Chancellor Rachel Reeves delivered the Spring Statement 2025, outlining the UK’s economic outlook and the government’s fiscal priorities. While the revised growth forecast signalled a slowdown, the statement introduced key policies on public spending, welfare, housing, and defence. Here’s what you need to know:
ECONOMIC GROWTH AND FISCAL OUTLOOK
• The Office for Budget Responsibility (OBR) has halved the UK’s 2025 growth forecast from 2% to 1%.
• The government expects to move from a £36.1bn deficit in 2025-26 to a £9.9bn surplus by 2029-30.
• Despite short-term economic uncertainty, the Chancellor remains optimistic, stating that government policies will result in a larger economy by the end of the forecast period.
PUBLIC SPENDING AND WELFARE REFORMS
• Government departments will face annual budget cuts of £2bn by the end of the decade, potentially impacting 10,000 civil service jobs.
• Welfare reforms are set to save £4.8bn, including reductions in Universal Credit for new claimants and stricter eligibility tests for disability benefits (PIP) starting in 2026.
HOUSING AND INFRASTRUCTURE INVESTMENTS
• A £2bn grant will fund the construction of 18,000 new social and affordable homes.
• £600m will be invested in training 60,000 new tradespeople (including bricklayers, electricians, and engineers) to boost the construction industry.
BOOST TO DEFENCE SPENDING
• An additional £2.2bn will be allocated to defence, including £400m for innovation and £200m for nuclear submarine jobs in Barrow.
LIVING STANDARDS AND DISPOSABLE INCOME
• Real household disposable income is expected to rise by an average of 0.5% per year from 2025-26 to 2029-30, driven by wage growth and falling inflation.
• Ms. Reeves stated that households will be over £500 better off per year under the current government’s policies.
THE MARKET REACTION
The markets reacted cautiously to the Spring Statement, balancing optimism over fiscal policies with concerns about slower economic growth.
• Stock Market: The FTSE 100 saw a modest rise, gaining 9 points to reach 8,673.
• Bond Market: UK government borrowing costs declined, suggesting investor confidence in the government’s fiscal plans.
• Currency Market: The British pound weakened slightly, reflecting investor caution over downgraded growth projections.
CONCLUSION
The Spring Statement 2025 sets out a path for fiscal stability, focusing on reducing the deficit, investing in housing and defence, and supporting income growth. While short-term challenges remain, the government remains confident that its policies will lead to a stronger economy in the years ahead.
